Berkshire Hathaway - Corporate Affairs

Corporate Affairs

Berkshire's class A shares sold for $121,775.00 as of May 2, 2012 (2012 -05-02), making them the highest-priced shares on the New York Stock Exchange, in part because they have never had a stock split and never paid a dividend, retaining corporate earnings on its balance sheet in a manner that is impermissible for private investors and mutual funds. Shares closed over $100,000 for the first time on October 23, 2006 and closed at an all-time high of $150,000 on December 13, 2007. Despite its size, Berkshire has not been included in broad stock market indices such as the S&P 500 due to the lack of liquidity in its shares; however, following a 50-to-1 split of Berkshire's class B shares in January 2010, Burlington Northern was replaced by Berkshire in the S&P 500 on February 16, 2010.

Berkshire's CEO is Warren Buffett. His annual chairman's letters are widely read and quoted. Barron's Magazine named Berkshire the most respected company in the world in 2007 based on a survey of American money managers.

In 2008, Berkshire invested in preferred shares of Goldman Sachs as part of a recapitalization of the investment bank. Buffett defended Goldman CEO Lloyd Blankfein's $13.2 million pay package when the company had taken and not yet paid back $10 billion in Troubled Asset Relief Program (TARP) money from the United States Department of Treasury.

As of July 1, 2010 (2010 -07-01), Buffett owned 32.4% aggregate voting power of Berkshire's shares outstanding and 23.3% of the economic value of those shares. Berkshire's vice-chairman, Charlie Munger, also holds a stake big enough to make him a billionaire, and early investments in Berkshire by David Gottesman and Franklin Otis Booth resulted in their becoming billionaires as well. Bill Gates' Cascade Investments LLC is the second largest shareholder of Berkshire and owns more than 5% of class B shares.

Berkshire Hathaway is notable in that it has never split its Class A shares, which not only contributed to their high per-share price but also significantly reduced the liquidity of the stock. This refusal to split the stock reflects the management's desire to attract long-term investors as opposed to short-term speculators. However, Berkshire Hathaway has created a Class B stock, with a per-share value originally kept (by specific management rules) close to 1⁄₃₀ of that of the original shares (now Class A) and 1⁄₂₀₀ of the per-share voting rights, and after the January 2010 split, at 1⁄_1,500 the price and 1⁄_10,000 the voting rights of the Class-A shares. Holders of class A stock are allowed to convert their stock to Class B, though not vice versa. Buffett was reluctant to create the class B shares, but did so to thwart the creation of unit trusts that would have marketed themselves as Berkshire look-alikes. As Buffett said in his 1995 shareholder letter: "The unit trusts that have recently surfaced fly in the face of these goals. They would be sold by brokers working for big commissions, would impose other burdensome costs on their shareholders, and would be marketed en masse to unsophisticated buyers, apt to be seduced by our past record and beguiled by the publicity Berkshire and I have received in recent years. The sure outcome: a multitude of investors destined to be disappointed."

Berkshire's annual shareholders' meetings, taking place in the CenturyLink Center in Omaha, Nebraska, are routinely visited by 20,000 people. The 2007 meeting had an attendance of approximately 27,000. The meetings, nicknamed "Woodstock for Capitalists", are considered Omaha's largest annual event along with the baseball College World Series. Known for their humor and light-heartedness, the meetings typically start with a movie made for Berkshire shareholders. The 2004 movie featured Arnold Schwarzenegger in the role of "The Warrenator" who travels through time to stop Buffett and Munger's attempt to save the world from a "mega" corporation formed by Microsoft-Starbucks-Wal-Mart. Schwarzenegger is later shown arguing in a gym with Buffett regarding Proposition 13. The 2006 movie depicted actresses Jamie Lee Curtis and Nicollette Sheridan lusting after Munger. The meeting, scheduled to last six hours, is an opportunity for investors to ask Buffett questions.

The salary for the CEO is US$100,000 per year with no stock options, which is among the lowest salaries for CEOs of large companies in the United States.